Project Timeline 2005–2010

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Proof of Concept Phase – Interview K

Categories: Interviews, Proof of Concept Interviews, Support Material
Date: 21 April 2005
Contributors:

Andy Lloyd James: Is that going? That’s ticking away nicely. I’ve sent you the questions.

Interviewee: Yeah I’ve got it here.

It really goes to the heart of that first question, the key issue question about [xxxxx]. Well and incidentally you are attributable on this.

Yeah thanks. But I’ve still got to deal with the networks.

And if at the end of it you’re uncomfortable with the things you’ve said, that [xxxxx]…

No, no that’s all right, I’d rather I’m not directly quoted on, because I think they’ve got serious issues, you know like I say I think the single biggest issue facing certainly the production side of the industry is the changes to foreign and cross media ownership could well sell the [xxxxx] or independent production in Australia, unless there are some protections built in for these foreign investment provisions and particularly into the broadcast outlets.

A lot of people say… it’s not a direct answer to that but a lot of people say that if you were to allow foreign ownership, then it would up the level of [xxxxx] competition. Well, increase the amount of diversity and quality to innovate new products, now you’ve sat on both sides of the…

No, I don’t… well I don’t believe that at the moment, I don’t think it will increase the amount of money that is spent on production, because you‘ve got to remember that companies are going to invest in broadcast outlets in Australia not because they want to actually help spend more money in the market place. they don’t, they want to take profits out of the market place. So they’re… you know, the investors and the existing operators are all about keeping their costs down, keep their overhead down, and keep the return to shareholders up. So I don’t think there is ever going to be a situation where they’re going to say – “Oh we’ve arrived, now we’re prepared to spend twice as much on an hour of drama”. But the only way they’ll ever spend twice as much on an hour’s drama is if they’re forced to. They’re never going to do that. You’ve got to remember broadcast outlet is not about quality. They’re about ratings.

Yes.

And they don’t give a shit how the ratings are arrived at, so long as they get them. And if they have to throw money after it, they will. But preferably, they want the ratings without throwing around a lot of money. They want the returns for the shareholder.

Is that…. I got… the free-to-airs, but the commercial free-to-airs, do they make Australian products represent [xxxxx] some extra cash on the market or do they make Australian products across that regulate issue or is it a bit of this…

Well I think… it’s different for different broadcasters, if you look at the history of it, the Seven Network has always been a strong producer of Australian content, even before they were regulated to do so.

Yep.

And the Seven Network in my history of it, has never had a problem meeting content standards, because it’s always done more that it’s required to.

Yeah.

And the reasons Seven has always done that is it’s entire philosophy of strategy is that the Australian public at the end of the day would prefer to watch Australian programming, and therefore it’s the one element of their schedule they can control. When you have output deals with Hollywood Studios, you’re highly dependent on whether that studio comes up with the goods. This is why Seven’s had a lean few years actually, and that’s why they’re having such a great year this year. Because Hollywood delivered for them.

Yeah.

But the one area… element of their format they can control is the domestic production. And therefore… and in order to distinguish themselves in the market place, they vigorously went after Australian drama, right from the early days. Like the Seven Network produced the first mini-series in this country with “Against the Wind” many years ago. It’s been an innovator in terms of Australian content on that. And in the case of the Ten Network, I think historically… history will prove that the Ten Network has only ever pursued Australian production because there’s been a legislative requirement for them to do so. Had that not been there? Ten would not have done that. They had Canadian owners that had no interest in spending money.

I was going to say, it wasn’t [xxxxx]?

No. So I think what Ten and probably within the last 2 years have realised, is Australian content is, actually can give you a premium with rating.

It does.

It does. It definitely does and again I think Ten have realised if they need to produce, and of all the networks Ten are most approachable from an independent producer because Ten have no infrastructure and don’t want to have the infrastructure, so dealing with Ten tends to be less complicated. Channel Nine, I think, like producing Australian content, and always are, historically have only ever produced to the minimum requirement. But have usually done it fairly well. They’ve never really had a great track record in drama, because I don’t think they’ve ever really understood how you need to look after drama on air. But they are certainly getting a lot better at it, and…

You mean in terms of how [xxxxx] how much they [xxxxx]?

Well, if you look at the history of it, the Seven Network has a far greater success with Australian drama than Nine. And I think there’s a simple reason for it, is that they understand… first of all at Seven the most successful Australian drama on the Seven Network, from the moment the idea is pitched to the network to on air, is about 2 years… they’ll spend 2 years developing it. Channel Nine will get an idea and want it on air as quickly as possible. And as a result, the drams have a short life because not enough work is done on the script, there’s not enough development and then also, when they get it on the air, they start moving it around the schedule, whereas Seven historically, have always put drama straight on ‘lead the line’.

Yeah.

And it will rate! Like when “Home & Away” first started years ago, Bob‘s day standards would have been cancelled. But then they just put up with terrible ratings, for a year and a half and then they forgot. And here we are 15 years later and it has contributed significantly to their bottom line. In terms of the overseas sales and that, and…

The public broadcasters…?

Yeah.

And original production?

Well… well starting with SBS, I think SBS did a very public service style of having a go at it, and are trying to do stuff that’s a bit different and they’ve got to do it within the means of a fairly limited budget compared to the budget the ABC and the commercials are working to. So, you’d have to say SBS are trying… I think part of the problem I’ve got with SBS is the processes they have in place are too public service orientated, and they’re not creatively driven enough. And they tend to have people there in my view who are ill-equipped to be commissioning stuff. That’s a general statement. The ABC, I think is an appalling disaster, if you consider the potential of the ABC in terms of its coverage of the country, it’s accessibility to the Australian audience, the fact that it’s got publishing, retail and radio attached to it, means that something quite interesting could be created here. And what we’ve got is this, what I have referred to previously as this sleeping, lazy, giant that can’t be woken from its slumber. And if you compare say the ABC to the BBC…

Yes.

You know, effectively the ABC is our equivalent of the BBC. The BBC would be one of the most commercial orientated broadcast organisations in the world and the ABC should be…. The Board of the ABC should be ashamed of what’s going on there. And I think…

But it’s what they want.

Well, perhaps it’s what it wants… I think there’s been far too much political interference in the ABC over the years. While there… I think there has been in the BBC over the yeas, but effectively they’ve always appointed people to run the BBC… not always, I shouldn’t say that… certainly in recent history they’ve had people running the BBC like Greg Dyer, and I think Greg had a really terrific start at the BBC in turning it around in that one, probably to his own detriment, fell out with the government. He was basically a government appointee from the commercial world as it appears, and went in but he basically turned the place on its head and made it far more aggressive and a far more commercial [xxxxx] and now it’s a booming business. In fact they’re so successful, the government are now saying they have to sell half or what, because it is creating a monopoly in the marketplace. Well, hello, wish we had that kind of problem here, that would keep me very happy. You know at the moment as an independent producer, you can’t even find anyone at the ABC to pitch you idea to, because they don’t have permission there to take pictures from externally in some dominance, that is. You know and the ABC, if we were honest about it, is full of people who you wouldn’t give a job to. They wouldn’t get a job in the real world. And you know you’ve got entrenched behaviour there, you’ve got immune, that staff hearing that strangles anything that remotely shakes them out of their slumber. You’ve got… people there who are not responsive, spending company’s money, there is no accountability. And I think that’s the problem. And with all due respect to Russell Balding, I mean he’s a very nice man but you know, he’s a nice guy, and he’s not very effective. There is nothing entrepreneurial about him. And certainly I don’t think the ABC is going to be the driving force in the next 50 years or I become [xxxxx].

Which is a real issue so, if that’s where we are at now, just [xxxxx] the cross of foreign changes what from SBS to that [xxxxx]?

Well the cross on foreign has a lot of upside to it, and it has a lot of… far more downside I think, the upside potentially is that more investment money is ti come into the marketplace, particularly to the broadcast side of the business, and that on the basis that it could be very positive. I think given that is the potential, the government seriously has to consider broadening the spectrum and allowing more broadcast outlets, whether that be a fourth commercial network, or multi channelling on the digital spectrum or something. But to expect all this money… the investment money to come into the marketplace and maintain the current structure is where I think we’re going to have serious problems.

Yeah.

Serious problem from the point of view, at the moment there is no requirement on any broadcast that could commission anything for them to have to do so. The Networks theoretically would prefer to make material in-house. What is stopping them doing that on a wholesale sense at the moment is the cost of the overheads for that. However foreign investment will alleviate that overhead to the point where it could be negligible in a scheme of things, and I think there will be a concentration of in-house production.

Yeah.

And therefore I think, what we’re going to have is a very limited independent production community, which is pretty limited now I think. And what it also means I think is you’re getting an output that is coming from a particular editorial point of view. In other words, you’ve got the influence of the Packer Family on Nine network, Stokes at Seven, and whatever influence you’ve got at Ten, and… so you’re not getting a more diverse business, you’re getting a more concentrated business in my view. Now, if the government of the day is prepared to allow the foreign investment, and strap on some add-ons to that, one is production quotas from the independent community. What that means is we’re getting independent created [xxxxx] stories across the broadcast spectrum. In other words, free of editorial and [xxxxx] largely. And also it protects the Australian story telling, so we don’t have American, British or foreign investors coming into this territory demanding that, you know their arm in the U.K, the only time you can ever make a drama in Australia it has to be a co-production, with the AFA, in other words you’re getting U.K stories, produced and sold in Australia. So I think we have to have some protection in terms of the cultural sense, and there are ways of doing that without interfering with the Free Trade Agreement.

I was going to ask you, there are ways of doing it?

I think ways of doing it, yeah, is to put in the pen and quotas in, that’s all you need to do.

And they can’t do that on the [xxxxx].

Yeah. There is nothing to stop it, the only thing the government can’t do is raise the level of Australian content to 55%, underneath that they can do what they like, they can say to the broadcasters one 100% of the output has to come from independent producers if they want to, provided their 55% doesn’t go any higher.

So it’s the Australian content level that can’t be raised, not the question of who produces it?

Exactly. And people suggesting otherwise are nothing more than trying to cloud the issue because it’s simply untrue.

Yeah.

And the thing is the way government can protect the cultural aspects you know, the government can’t come and legislate cultural issues because that is improved, that will put them in head on with the Free Trade Agreement. But by putting up the production quotas, we’re automatically protecting our cultural interests, just simply in one swoop doing that. And the other… the other point I think the independent producers, apart from getting their actual quotas, need to be able to retain their IP, and the reason we need to be able to do that is so that we can have a viable independent production sector, and we an export our IP, and what we’ll do… what it will do if we can retain our own IP, where the broadcaster is actually not allowed to have it, unless they come to some significant commercial arrangement, if we can retain our IP, it will generate investment, into the independent production sector. And I think that’s very important. At the moment there is no reason… there is no reason for significant investment to come into the independent production sector, we’ve got a very small market in which we have to operate, in terms of trade, the operator, and they’re hardly attractive.

So that your IP’s go with your first [xxxxx]… say in Australia, say because the IP do have a free style to [xxxxx] on the networks, because the IP goes with it [xxxxx].

Yeah, the minimum 50% of it goes, what I’m suggesting is that none of it should go. And every single time you go into a network and the network says, look, we’re underwriting the cost of this production, it’s only reasonable, we own at least 50% of the back end of this. And we want these rights, and the ancillary rights, and the [xxxxx] rights. What I’m saying is no, no, you should have none of those rights. All you’re buying is the right to broadcast this thing, that’s why you should be underwriting the cost of production. Now if we retained all those rights, and we got to exploit them and we got to retain the benefit of exploiting [xxxxx], we can build reasonably good business with this. See at the moment the independent production sector is made up of small to medium businesses, that’s what we are.

Yeah.

And… But there is an opportunity…

A lack of investment.

A total lack of investment, and the reason we have the lack of investment is because the infrastructure that we are working within is shallow, frankly.

I’ve got no IP, is what you’re saying, because you have got no right to your own idea, in fact you’re not [xxxxx] invested in Seven.

No, I can sit there and demand I retain my IP, and guess what – my show doesn’t get made, and…

Sorry, I made a mistake [xxxxx]

Talking together (Inaudible)

Interviewee: And that’s the issue you see… I have got experience… I’ve got an experience of that, when I went to the [xxxxx] show the Nine network for 6 months, and the reason being, because it became very clear to me the Nine Network don’t want to deal with the independent community. I went in there and they said, “We love the idea, but we don’t want you to make it, we want to make it, we’ll buy your IP off you”, and they offered me a piddling amount of money and I said, “Well I’m not interested in selling my IP, I’m interested in producing.” You know, I don’t want to produce myself into bankruptcy. I just want to produce and make a reasonable living in employment. That’s all I’m trying to do. So I actually declined to make the show for them. I walked away, and I’m not the only one who has done that.

There are a few elements you’ve raised and vis-à-vis 2015, beyond the foreigner things, I understand that the… most of the elements are actually to do with government, the first is actually government [xxxxx] robust, and the second is the role of the public broadcaster.

Well I think… I think, you’re right, you’re absolutely right. I think part of the problem we’ve got facing us at the moment, as an industry is we need to find a way to convince the government that television production and the stories we tell and the shows we create is a genuine export industry. And if the government saw us as a genuine export industry, then what would come with that is all the normal protections and support one gets for an industry, and.. I think the problem’s simple, the problem we’ve got at the moment is the television production industry where… where we operate, we sit in an arts portfolio, that’s under the… that‘s headed by a junior minister, so we’re down there with a basket-weavers, frankly.

Yes.

We are not considered even in the main part of the communications portfolio, that’s a real problem. And there is a perception problem, we need to turn that around and also historically, conservative governments have never really grabbed hold of the arts, as they choose to call us, we prefer to call ourselves not part of the arts, but as part of media, and the government have never taken us seriously. I don’t think they even really understand it. So I think… I don’t think we’re ever going to see significant change until such time as we can convince the government that they need to think very differently about our industry, about how to approach it. And the day the government see us as an export industry, for instance… I don’t see our business should sit under the arts portfolio or even the communications, I think we should fall under the Department of Industry. Frankly.

Yes that’s [xxxxx] and I was just [xxxxx].

[xxxxx] the Department of Industry will with us, there’ll be the Department of Industry will start driving the sector as well. You know, and that’s the problem. We need a change of…

[xxxxx], and this is not… this is not for quoting because [xxxxx] goes [xxxxx], does anybody… has anybody as far as anybody else [xxxxx] Department of Industry or anyone else [xxxxx] media?

Yeah, I’m aware that people like Ian Robertson and Holding lately, I don’t know if you’re going to be talking with Ian, but I think he is someone you should talk to. Ian… and Ian and I have had this discussion actually, and he shares similar views to me, I know he has had discussions with that… at a government level. The problem is I don’t think it’s SPAR, because I think at SPAR… [xxxxx] is the issue. This is the problem. And part of the problem we’ve got to start, the thing you have to keep in mind, some of the larger members and when I say larger members… we’re all levied upon our production, right? So the more productions, the more financial contribution you make to start.

Yes.

So if some of the companies that make the larger contributions is SPAR, SPAR are foreign owned. Well Gundy’s is Fremantle, right?

Yep.

So some of these issues that SPAR has to deal with, some of its own members are opposed to the position that SPAR needs to adopt because they’ve got a conflict of interest. And if we were to seriously consider SPAR as a totally Australian driven producers association, a company like Fremantle would not be members. Now the reason they’re a member, because they contribute [xxxxx], and if they weren’t a member SPAR would probably fold. That’s how finely tuned finances are in the SPAR. And that’s another issue. So as a result, for SPAR to come to terms with this stuff, they almost feel there needs to be explanatory with SPAR which is really the… surely Australian owned as operated companies that come under policy.

And they’re the sort of [xxxxx]…

And I mean.. yeah, I know but they would all leave if that happened. And SPAR would probably cease to exist.

Yeah.

That’s the dilemma. But not just… you remember Granada?

Yes.

Granada was a brilliant company.

Yes.

And they all opposed all of this stuff of course.

Never thought that [xxxxx]…

It was a mission…

Yeah!

And that’s the fine line that Jeff Brown has to pull, you see.

When you… when you think…

… within a broadcaster now being this independent producers.

Looking down from where I am, you see mobility, you see all of those codes coming up, you see the potential for some fragmentation of [xxxxx] revenues into other areas.

Correct.

Is… do you get a sense yet that… let’s assume for 2 seconds that Channel X is, revenue is being fragmented to the extent that it’s going to pay for the rest of it as well, or he going… he wants to pay less for drama. Do you get a sense that there are business models growing, which actually… take on board the potential for my buyer needs, the potential for all of the other media, and I mean the [xxxxx] is very basic.

I think it’s very early days yet. But I think it is going to become a growing thing, I think the technology needs to improve and be more efficient than it is now, so I think that will come too, in a very short period of time. But I think… that’s what… I don’t think the networks could ever reasonably argue the revenues are such that they can’t afford to pay what the company pays for drama.

Yeah.

My view on it is… the net… the most recent KPMG report showing the enormous amount of money all three networks have made in the last financial year, and guess what? Not a single independent producer has received any higher production fees, in the last 3 years. Just doesn’t happen. And they’re writing massive revenues, and not only are we not getting any greater revenue, the networks are still happy to commission shows like Blue Healers, because all they’re prepared to pay an hour for drama is between 3 and 350,000 dollars. Imagine… and do you know what? They can all afford to pay 6 or 700,000 dollars an hour for drama. And if they did, imagine the quality of drama we could make in this country. We would stop making shows like Blue Healers, which is in 3 sets.

And that’s just the profit?

Yeah. And that’s… that one there, that was the issue in the U.K and I actually I mean this shouldn’t be reality, you could look at a reasonable price for drama. Because the truth is… a significant thing has happened in the U.K and I actually think we have an opportunity at the moment whereby I sent an email the other day and said look, it’s not for me to tell you how to do your job, what stars to [xxxxx], I’m just offering an opinion here, I know the Prime Minister loves all things British.

Does he?

Oh, yeah. He is often looking at Britain for examples of the what things he does like.

That’s all right, but there’s all these programs…

No, no, no, no, no… he just [xxxxx]. The model, some of the British models on business, therefore here is a great opportunity for us. One thing Britain have done, is the British government at some point made a decision that television production was an export industry, and it’s exporting British culture to the world. So it immediately then comes under the jurisdiction of a Senior Minister in the British Government. Now the first thing he did is he commissioned research.

That’s very high level of enquiry.

Oh yes, you’ve got public enquiry, you‘ve got research stuff, and what came out of that was OFFCOM, and the other thing that happened, they had production quotas in place for many, many years to stimulate the industry…

Yeah, as a stimulus!

Yes, now what worked actually… strange enough… what worked in the favour of the independent producers, as they are given this to what I think are terrific terms of trade, and fair terms of trade, what worked in their favour was that for the past 3 years, or 3 years prior to OFFCOM being set up, BBC and ITV did not meet the 25% quota, they failed.

Inaudible.

ITV and [xxxxx]. So what happened is the government said, well okay, and there was no real penalty to fail. So the government said, okay, well we’ve got this export industry here you know and it’s largely driven by the shows that are commissioned domestically, that the broadcasters aren’t meeting the quota for 25% and we’ve got a short fall of export. So we have to fix that. So, what they do is they go and set up OFFCOM, and that enshrine the 25% quota an hour law, so if the broadcasters fail to meet that they are in breach of the law and now there are serious penalties involved in not doing it. The problem we’ve got at the moment, this is why I scoff a little bit at Geoff saying, we’ve got to sit down with the networks and discuss terms of trade, and I said no, bullshit. I said, you’ve got to understand something, the commercial networks regard SPAR with contempt.

Yeah.

They don’t like SPAR. It insist… and every now and again they want to deal with SPAR largely to get support for their own agenda. And they’re not interested as far as that, they couldn’t give a shit, and they’re not going to support us. And.. and I said, you don’t [xxxxx] once decline. What we’ve got to do is we have go to get at a government level, and then [xxxxx], and the problem we’ve got with the current terms of trade whatever they are, I don’t know what they are. When you’ve got terms of trade, you deal with the network, right, because there is no law to support it, [xxxxx] when I go and sit in front of the network and say, there’s my pitch to show. Guess what? The terms of trade are gone out the window and I’ve got to grab whatever I can get because they don’t give a shit about the terms of trade, so it’s just got to be set way above the network.

Legislation and regulation of the back [xxxxx].

Exactly, now the one thing that we don’t mass produce, that the networks have, the networks have huge lobbying powers, well first of all they’ve got a broadcast licence that the government, particularly when it’s getting close to an election time, it doesn’t want to upset the owners because they want to get re-elected. And they manipulate… the government manipulator is just as much as the broad power at election time. The only thing is broadcasters they’re full time lobbyists in Canberra, and SPAR is a small organisation, we can’t even the infrastructure to build on. So you know, we’re working way behind the eighth ball here and I think.. to be honest I think for SPAR to seriously want the stuff, I think it needs to consider how it’s going to finance its effort in the future. So I think the industry itself needs to restructure itself a bit. One, so it can match the lobbying effort in Canberra. I’m not suggesting that we do Geoff out of a job because I think Geoff does a good job, but I think what SPAR needs, whether it’s as the President or whatever the position is, but it needs somebody who is a professional person who comes from a trade industry and who is respected in Canberra, and who can move around the corridors of Canberra at will, and knows he’ll get meetings with Ministers. I was horrified when I went to my first SPAR meeting to find we’re meeting with… SPAR was dealing with Rob Kent, who is a Junior Minister, and I’m saying, why aren’t we with the Minister of Communications, having meetings there, this is a joke. That’s the problem. And with all due respect to Geoff, yeah I don’t think Geoff has got the clout, quite frankly.

[xxxxx].

And frankly I think there’s a [xxxxx] for him, but I’m not sure running around the corridors of Canberra, I mean that’s someone else’s job who can… and we need somebody who can stand out there and stand toe to toe with Lecky and McAlpine and these guys and match them.

Yep.

I wouldn’t put Geoff into that environment, they’d eat him for lunch. And I think that’s also part of the problem. But in order to do that, the finances of SPAR need to be looked at. So that it can structure itself, so I think SPAR has got a lot to do as well.

So then, the big issues for 2015 are…

I think that is the big issue for the next 5 years, that.

The government’s role…

Yeah, the government’s role is setting the framework. Setting the framework, and also putting in place a SPAR [xxxxx], a supporter of [xxxxx] independent [xxxxx]. While I think, and I think there are a few other very key issues, one is somewhere between now and 2015, there is a strong chance the government will turn off a lot off the analogue signal on television, because I think what will become increasingly obvious to the government is that that analogue space is quite valuable, for them to sell off.

Yes.

And there’s Telcos out there who would grab it tomorrow.

Yes.

So I think we’ll see a lot of movement in that area as the Telco, particularly if Telstra gets sold off and other Telcos come into the marketplace in a bigger way than they already have, but there’ll be a lot of pressure on the government to utilise that spectrum. And therefore…

Is it… does that mean that they’re going to have to put a lot of pressure on people’s opinion about it?

Yes, well the thing is, I think the uptake domestically on digital receivers is growing at a fairly rapid rate, I don’t know the exact figures at the moment but digital broadcasts, the CBA would know that. The other thing, I think the problem… see I’ve had a confidentiality discussion Lecky last week, and I spoke to him about digital. And I set up digital at Seven before I left, for the last 12 months. And I said, well, you know I’ve been looking at your digital stuff that you’ve done, and I said, mate, I don’t understand what you‘re doing. Like it looks to me what you’ve done is you’ve taken the remnants of AOL Seven and you folded that into your digital area, and you’re using effectively web people, web expertise to do your digital, because it looks like an internet page, they look like web pages, it doesn’t look like television. And he laughed, he said, yeah that’s exactly what we’ve done here, and he said, mate, digital is f****d anyway, who cares? And that’s his attitude. The only reason they’re doing anything, is because they have to use the spectrum, they’re not doing it because they want to.

And that is presumably why they wanted [xxxxx] for HDTV, so that they actually didn’t have to worry about.

Well that’s why Packer, well I think again different agendas for different networks. Well we know… I know for a fact the reason that Nine has pushed so hard for full blown HD, you know 10 ADI–HD, was so that the HD would use up the entire spectrum and Packer doesn’t need multi channelling, he’s already got it in his investment in Foxtel, he’s protecting his Foxtel investment doing that. Channel Ten wanted full blown HD because they didn’t want to have to have the cost of doing more channels. Seven are saying full blown HD is a waste of the spectrum.

I know, they always did.

And multi channelling is the way to go because – and I think it’s right – at the end of the day, people are not going to… you know, the consumer is not going to invest in the technology, they’re going to invest in entertainment options. You give more entertainment options, they’ll go and buy the technology. They won’t buy the technology because someone was saying you get a clearer picture for god’s sake, it’s just not… And this is what the Allston was at the time, was running around saying, you know, you’re going to get clearer pictures, well geez, that’s exciting, isn’t it?

That’s a really good piece of…

That’s a load of rubbish. I actually genuinely believe… you have to believe that the multi channelling will come. I think Pay TV even now can’t hide behind the fact they’re a fledgling industry, that’s bullshit. They’re no longer a fledgling industry. And there is no reason to resist multi channelling on the free-to-air spectrum. Now, I think there will be a healthy debate over whether any of those channels can be subscription based or not, I don’t think they should be, I think they should be… I think they should be free-to-air. And if they were free-to-air, you know if those channels are up and operating now, this whole kafuffle about the Ashes Series in the U.K. that’s going on the count down, wouldn’t be had. It would be on one of the multi channels, because Channel Nine have got it.

So what would be on that?

Well… I don’t know, it depends on what the broadcast is [xxxxx] along. There would be sometimes shifty, I don’t think there would be a lot of it, but they’d be sometimes shifty, but there’d be fantastic opportunities. Now, to give you an example, in the U.K. they spend two to three times more per hour on a drama than we do, in this country. But they have more broadcasts outlets. So when the BBC commissions a drama on BBC [xxxxx], that will also get a run on BBC Free, it will also get a run on Free to View, they can amortise the cost of that across a number of outlets that they have an interest in, and the same can happen here. If you…

So they modify their business [xxxxx] in the same way that you… that you as an independent have to modify yours.

Yes. Exactly right. And so the… to have more channels, more digital channels I think is inevitable, and I think particularly as the digital technology, because at the moment I think basically each network could add four or five… four channels I think it is to their current channel on the digital spectrum. As the digital technology improves, probably within the next 5 years they will be able to probably double that and… and that in itself has got to be a good thing, provided you know, they do use the spectrum well, and wise.

Have you ever got any risk of the [xxxxx] or anywhere else about the [xxxxx] up in the old [xxxxx] and if they don’t use it, they might just have to or at some point they’ll pass it onto somebody else in this game.

Well the problem is… the networks have…

They have their own transmission.

Yeah, they own their own transmission, but the one thing that the networks have successfully done, they’ve convinced the government that the way to use it up is with HD and that’s bloody bullshit. I… my view is I think the networks should be able to get HD, but they also should be able to do multi channel, they should have the choice. They shouldn’t have to… there is no other country in the world where HP is mandated at 20 hours a week. It’s a joke. It’s an absolute joke. And I remember when HD first started and I know it was programmed in the Seven network, I couldn’t find 20 hours a week of programming in the world to put to air. It just didn’t exist. It’s just absolute nonsense and the government, I mean 16 other networks had put their production facilities with HD to generate your own production, well between the three networks they must have invested 100 million dollars in that. It’s a joke. It’s just a total waste of money. That 100 million could have been poured into more production, it would have been the better way to go.

Yeah.

To get HD [xxxxx] is a load of rubbish, but you know I think the networks have been very effective in how they’ve lobbied government. Now I remember in a studio at Seven, please don’t quote me, and Richard Allston came in, because Terry Stokes invited him to see a demonstration of HD and standard definition, so he went into the studio, and there were two monitors, and Terry said to Allston, tell me which monitor is HD, I beg you tell me the difference between them, and he couldn’t. He picked the wrong one. And he said, well there is my point, why are we wanting this issue to where we have to do HD. And he can’t even tell the difference, how am I going to convince the public there’s a difference. And Allston didn’t want to hear this, because it’s not what he wants, people see it as his agenda.

When you look in… when you look at [xxxxx], realistically what’s the best outcome? For the audiences and for [xxxxx]…

I think what is going to happen, I think there’ll be… at some point in the [xxxxx], television will be deregulated, largely. What that means and what configurations I’m not sure, but I just know there’ll be a lot of deregulation going on over the next 10 years. And I think the foreign cross media will be the trigger for that to happen.

The domino effect.

It will be a domino effect. And hopefully what will come, ideally I think, what we need are more broadcast outlets that must produce Australian content and must produce a significant percentage on it from the independent production sector. For me that’s the ideal thing. The other thing I think is going to happen, and we’re starting to see some signs of it now, but it’s very early days, I think we’ve already see a fair bit of fragmentation in the marketplace, whether that be the impact of DVDs, electronic games, multiplex signals, the whole bit, for the advertiser, the advertiser I think is starting to feel the value of the commercial break has diminished, because what’s happening is the cost of producing a 30 seconds commercial is going up, the cost of buying the airtime in the network is going up, not going down. Therefore the advertisers’ return on investment is going like this. Now, I think the advertising, the market, the brands, the big brand of products are already now starting to think about, well how can we go and spend out money and still have the feedback we need. Now we as a company are thinking that, like we between you and I, we formed an alliance with Senna, the media, we’ve got exclusive arrangement with them, where we are their production company for sponsor produced program in an integrated solution through all the [xxxxx], would it be our production or someone else’s production, we advise them [xxxxx], because what they’re conscious of is not to integrate the brand with the program, but now you do it professionally and not feel badly, like it’s a bad day to do [xxxxx]. And the reason we’ve entered into that arrangement is I genuinely think what you’re going to have somewhere between now and 2015, I think advertising agencies are going to align themselves with production companies, I think that’s going to happen.

That’s the [xxxxx] related to [xxxxx]?

Absolutely. So I think that’s going to happen and I also think… to some extent some agencies, I think will buy a piece of… will buy equity in production companies, to protect their need to market brands better and to control it, and the reason we’ve done this, is we’re only a new… we’re a new company on the landscape, and we have to compete. So basically we sought out one of the biggest TV buying agencies in the country, are going to form an alliance now, so in 5 to 10 years’ time, we’re already in place. And we’ve already figured out how the relationship is going to work, I don’t know if we’ll wait for 10 years’ time to have to go through the pain of that, I’d go through it now while we’re a small company.

When would your old commercial broadcast [xxxxx], and what does that mean to in terms of revenue? My impression of it, essentially the relationship has been with the broadcaster and the advertisers, and then the audience and the independent [xxxxx] kind of [xxxxx].

Yes, to some extent.

So what happens now, because in the [xxxxx] the dispensation with that in fact, broadcasters suddenly find other people’s [xxxxx] in the [xxxxx]?

Yeah I think what will happen, and I think it has to happen, I think the power and the influence in the broadcaster will diminish. I think they’ll still be very powerful because they own the transmission signal. At the end of the day they own it under a licence for christ’s sake, it’s a public utility that they have a licence to print money from. And I think what will happen is if the government put in the right framework and we do get production quotas, we are able to retain our IP, we are able to attract investment into the independent production sector, and if some of these alliances fall under advertising we’re going to pass. I think what you’ll have is the independent producer and it’s [xxxxx] the configuration that works there, in a stronger position to negotiate with broadcasters and to dictate some terms in some cases, because at the moment… every position you go through a network with, you never come from a position of strength. You know, it’s got…

It’s got [xxxxx]. Yeah.

But the networks just say, f**k off, we’re not interested. Well you’ve got nowhere else to go. You’ve just go nowhere else to go, that’s the problem.

And that’s presumably the worst outcome you’ve given me?

Right, because that’s exactly right. I mean I’ll give you another example and I mean this is… it shouldn’t be used as a specific example in this because they’ll know where it came from, but I’ll tell you… and this is what makes me…

Get angry!

Yes, and this is what makes me a bit sad is, Queer Eye for the Straight Guy, that it took Channel Ten 8 months to decide to actually commission the show, I actually at the time, thought they commissioned it 6 months too late, they should have commissioned it 6 months earlier because the interest in the franchise was waning. And I think the ratings have proven that now, but at the time they were going to commission 12 episodes. So we contracted the talent on that basis, we budgeted on that basis, and then we waited months and months and months and couldn’t get a decision out of them. Now, what networks do is they like to keep all the balls in the air for as long as possible, so when they finally did commission the show, we had a truncated pre-production period, which for financially and creatively, and also they only commissioned half the episodes they said they were going to. So I’ve got contractual issues with the talent, I’ve got to go back and negotiate their [xxxxx]. Now the reason they did that, do you know why they did that? Because they wrote a 13 million dollar cheque to Simon Cowan in the U.K. to buy his show X Factor, and suddenly they had no money to do the show that they were going to do with us. But the X Factor is an unproven show, it hasn’t been to air anywhere in the world, and they were ready to give him a 13 million dollar cheque and then spend another 5 million making the show, so that’s an 18 million dollar production, which is not an Australian, produced by Fremantle, which is not even an Australian company. So all that money is gone on off shore, and we’re sitting here with an Australian production that’s just been cut in half. And Channel Ten said, you actually have to deliver at the cost per episode that you quoted us before. I said, well how can I make 6 episodes at the same cost per episode, I’ve only got half the episodes to spread my costs over, bloody f*****g oath.

Has that cost saver been through?

Not entirely. No. I had to lose margin to keep the production and to be honest, the only reason we did the show in the end is because it was the first production we’re doing as a company and we felt we had to, so we’ve done it for very little money and if it was to come round again, I’d walk away from it and say no, because it would be a bad business decision. And that’s the problem. I think a lot of independent production companies, even smaller than ours, if we don’t make any bad business decisions to stay alive. Some of these companies are going to produce themselves in the [xxxxx].

Absolutely, and it gets… and if it’s thought through then the kinds of production we’re talking about are 7 times more [xxxxx] for those people who choose to make single [xxxxx]. I mean there’s a lot of…

How do they survive on that is beyond me.

Yeah.

It’s just absolutely beyond me. You know and I think a lot of them survive from government brands and people in different institutions, like well you know, that’s not a business, that’s not an industry. That shouldn’t happen.

And that actually is part of the problem, that the industry has never, not only [xxxxx] it’s in the wrong place in the bureaucracy, but it’s also the industry in a broader sense has never treated itself [xxxxx] and said, this is the grunt that matters.

Look at the end of the day, if you had the right infrastructure and the right opportunities to attract the investment and all of that, you could do away with all that stupid government brands for this and that, that can all go. Frankly. But you need a proper infrastructure, before you get rid of that, because the poor little independent documentary maker would disappear overnight, if they haven’t already, there was a documentary conference on this week in Adelaide.

There is, yeah.

You know. I don’t how they fund that after that [xxxxx].

Well and again, that’s got the same problem that you were alluding to earlier on, because they’ve got virtually nobody left at the ABC, who [xxxxx]. And the one man I think that [xxxxx] at this [xxxxx] ahead of anybody else, that they’re creating some shit problem, [xxxxx] documentaries [xxxxx], there is a lot socially, politically [xxxxx] radically convinced.

But it’s actually stupid, because at the end of the day, it’s uneconomic to make it. You know what people like Sandra don’t understand. If you’re going to shoot a one hour documentary, isn’t any cheaper than going to shoot a half hour, you’ve got to shoot the material. The hour or half hour comes to the editing, so the difference in cost is marginal between the two. So, you know, all it means is the poor producer is that much harder again to get the finance to be able to make it.

Which [xxxxx] is [xxxxx] in terms of [xxxxx]. Last question, because you’ve really covered almost everything, is there anything beyond what you’ve said, if you were [xxxxx], there was something that you could do that was going to make it – that’s confidential, don’t worry about whether it’s a Packer or a [xxxxx] or Murdoch, or even this [xxxxx], but something that you could [xxxxx] like some ordinary [xxxxx].

A 50% production quota. That’s what I’d go for. And that’s the first thing I’d go for and then coming up with the digital broadcast spectrum. I’d force the broadcasters to aggressively adopt digital and I wouldn’t only let them hold the channel, I’d force them to hold the channel. You add another four channels and lose your licence. In fact not only multi channel, but force them to not own 100% of those channels, to take partners into those channels. You know at the end of the day, it’s a lot… they’re using the spectrum under a licence. They’ve got no rights to assume they have to have 100% of control of all of those spectrum.

Its not [xxxxx].

Oh yeah, absolutely.

Because there would be people lining up left, right and centre to take part.

Yeah, but you know, if each network is forced to add another four channels, and said you could… and those, other than your main channels, those additional channels, you can’t own more than 60% equity in those channels, that you must allocate the spectrum and you have to be on air by a certain date, go to it fellows. You watch, you watch the investment come into this country then, and you’ve got to have structural quotas across all that stuff as well. Suddenly you have the industry on fire, it will go. They’ll hate it, but you know what? They’ll get used to it. And they can all afford it. This is the thing that has taken all [xxxxx]…. And the thing that is so… you know, you only have to look at the latest KPMG revenue figures, they can all afford to spend a lot more money, and the thing is the government are taking 200 million dollars plus a year in licence fees. And the revenue [xxxxx] is growing. And the production industry, we’re not getting of that. We’re getting none of it. And we’re sitting there getting screwed over $10,000 here and $10,000 there. And the process is just a joke.

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